5 Dividend Stocks That Stand The Test Of Time

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 |  Includes: AWK, CVX, DUK, KO, WMT
by: MyPlanIQ

The new normal of low interest rates and likely turbulence has me looking for ideas in the area of solid companies with dividends. Sean Williams of the Motley Fool picks five stocks that are likely to be least impacted by the ups and downs of the market, and that has me interested.

He sought to uncover five stocks that would stand the test of time-- whether the global economy was booming or in a deep recession -- and today I'll share them with you.

These five stocks all provide necessity goods to consumers. Arguably, a few of you will find his definition of "necessity" a stretch, but given the impeccable track records of these five companies, he believes they make good investments.

In no particular order:

Company

Necessity

Dividend Yield

Duke Energy (NYSE:DUK) Electricity 4.70%
American Water Works (NYSE:AWK) Water 2.90%
Chevron (NYSE:CVX) Oil 3.10%
Coca-Cola (NYSE:KO) Food 2.80%
Wal-Mart Stores (NYSE:WMT) Clothing 2.50
Click to enlarge

Source: Yahoo! Finance

This ticks a number of boxes for me:

  • Large companies
  • Good dividend performance
  • In stable markets that have continuing demand in any market
  • Diversified choice

In his article, Sean goes into more detail of why he chooses the particular companies but, for this exercise, I am going measure them against our benchmark ETF portfolio.

Asset Fund in this portfolio
REAL ESTATE (NYSEARCA:ICF) iShares Cohen & Steers Realty Majors
CASH CASH
FIXED INCOME (NYSEARCA:TIP) iShares Barclays TIPS Bond
Emerging Market (NYSEARCA:VWO) Vanguard Emerging Markets Stock ETF
US EQUITY (NYSEARCA:DVY) iShares Dow Jones Select Dividend Index
US EQUITY (NYSEARCA:VIG) Vanguard Dividend Appreciation ETF
INTERNATIONAL EQUITY (NYSEARCA:IDV) iShares Dow Jones Intl Select Div Idx
High Yield Bond (NYSEARCA:HYG) iShares iBoxx $ High Yield Corporate Bd
INTERNATIONAL BONDS (NYSEARCA:EMB) iShares JPMorgan USD Emerg Markets Bond
Click to enlarge

Portfolio Performance Comparison

Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Retirement Income ETFs Tactical Asset Allocation Moderate 2% 22% 10% 77% 8% 57%
Retirement Income ETFs Strategic Asset Allocation Moderate 1% 6% 15% 96% 2% 8%
5 Necessity Stocks That Could Protect Your Portfolio From Disaster 18% 109% 17% 114%
Click to enlarge

This has good returns for as long as it has run. In addition, the risk adjusted returns are good. Bear in mind that five stocks should be part of the portfolio, and should be balanced with others in different asset classes.

Three Month Chart One Year Chart Three Year Chart Five Year Chart

As I look over the longer time horizon, this selection has done well. I like the idea of the different sub-classes mixed in with large companies offering dividends. One has to remember that any one company can get into trouble -- for example, Tesco in the UK has had a precipitous drop in its stock because it failed to garner its fair share of Christmas shoppers. So you may want to select another choice in the list. Overall, however, I think the approach bears merit and consideration.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.